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Disparate Impact

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Overview

The landmark Fair Housing Act of 1968 outlawed discrimination against people looking to buy or rent a home based on their race, color, religion, sex, familial status, or national origin—and the Supreme Court has ruled more recently that illegal housing discrimination can occur even without intent. Under the court’s 2015 disparate impact decision, a housing-related action can be held to be a fair housing violation if it disproportionately affects a particular protected class and the accused entity could have achieved the same legitimate goal with a less discriminatory practice.

What is the fundamental issue?

The Fair Housing Act prohibits policies and business practices which have a discriminatory effect but have no evidence that the policy or practice maker has a discriminatory intent.

I am a real estate professional. What does this mean for my business?

Fair Housing laws serve to protect anyone in a housing related real estate transaction from discrimination. Discrimination in housing adversely impacts the ability to own, purchase, convey, rent or occupy housing and adversely impacts the ability of real estate professionals to conduct their business. Disparate impact or discriminatory effects refers to a policy or practice which affects a protected class of people even if there is no discriminatory motive. There are situations where legitimate business needs might result in policies or practices that have a discriminatory impact, and there may be no readily identifiable and achievable alternate means to address the legitimate need for those policies. It may also be difficult to fully anticipate whether a policy does in fact have a discriminatory impact. Remedies for violating the Fair Housing Act can be severe including large monetary penalties and loss of license.

NAR Policy:

NAR supports equal opportunity in housing and in general opposes practices and policies which have a known discriminatory effect. However, NAR supports the ability for a real estate professional to continue such policies or practices if there is a legitimate business purpose for the policy and there is no readily available and not unduly burdensome less discriminatory means to achieving that business purpose. NAR opposes requirements that real estate professionals conduct unreasonable research into whether policies or practices have a disparate impact or discriminatory effect and support requirements that the entity alleging discrimination has the burden of proof for showing that policy or practice has a discriminatory effect and for showing that there is an alternative means to achieving any stated business purpose without being unduly burdensome. NAR supports limiting the remedies to corrective action for unknowingly having a policy that does have an unlawful discriminatory effect and opposes the sole use of demographics of people living in particular neighborhoods or buildings to measure whether a market is free from discrimination.

Legislative/Regulatory Status/Outlook

In 2012, the US Department of Housing and Urban Development (HUD) issued regulations codifying various appellate court decisions interpreting that the Fair Housing Act prohibits policies or practices which have a discriminatory effect even if they are facially neutral. This regulation addressed differences in the various court decisions and established which party in a case has the burden of proof as the case progresses. The US Supreme Court recently ruled in the case, Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., that the Fair Housing Act does recognize cases based on disparate impact.